Fed chairman says recovery may ‘stretch’ through end of 2021

A photo provided by Maersk shows the shipping company's depot at the Port of Tanjung Pelepas in Malaysia, where it is storing some of the many containers full of exports from China that stores in the West no longer want right away. The New York Times

Jerome Powell, the Federal Reserve chairman, said that the United States would have a slow recovery from what he called the “biggest shock that the economy’s had in living memory,” suggesting that a full rebound from virus-induced lockdowns could take until the end of 2021.

In an interview on “60 Minutes,” the CBS programme, Powell reiterated that both Congress and the central bank may need to do more to help workers and businesses make it through the sudden and sharp slump caused by efforts to contain the coronavirus.

“This economy will recover; it may take a while,” Powell said. “It may take a period of time, it could stretch through the end of next year, we really don’t know.”

The Fed has rushed to insulate the economy as coronavirus lockdowns caused business activity to come to near standstill, leaving more than 20 million people jobless. But it remains an open question whether the central bank’s actions will be sufficient if it takes a long time for the economy to fully reopen, leaving businesses short on income for an extended period and increasing the risk that many will close.

Powell has begun warning that lawmakers and the White House may need to do more to support households and businesses if the virus persists.

In his “60 Minutes” appearance, broadcast and streamed into millions of American homes, Powell reiterated that shepherding the economy through the darkest days of the coronavirus lockdown may require more policy action and suggested the recovery would not be seamless. Asked whether the economy could heal without an effective vaccine, Powell suggested that activity could restart before a treatment became available without making a complete rebound.

“Assuming that there’s not a second wave of the coronavirus, I think you’ll see the economy recover steadily through the second half of this year,” he said.

The Fed chairman suggested that the worst economic readings were yet to come, even as states begin to gradually reopen. He said that he expected “a couple more months” of job losses and acknowledged that the unemployment rate, which hit 14.7% in April, could peak at 20% or even 25%.